In the Twin Cities real estate market, most sales transactions involve two agents – the listing agent, who represents the seller, and the selling agent, who represents the buyer. In certain cases though, a buyer will find your home and make an offer without the services of his own agent. If this happens, your listing agent will not need to pay out a cooperating broker commission.
Great – this should equal to some commissions saving for you, right? Nope. Unless otherwise specified in the contract, your agent will be able to keep the entire commission for himself! This type of windfall is referred to by real estate agents as a “hogger,” and they’re more than happy to get one!
While handling the entire transaction himself may involve a little more work for your agent than an ordinary sale, it certainly doesn’t justify him keeping the entire commission for himself. To ensure that you receive the benefit that would result should the buyer of your home not be represented by his own agent, make sure that your listing contract contains a Variable Rate Commission clause.
A Variable Rate Commission clause included in your listing contract will reduce your total commission obligation in the event that a cooperating broker commission is not paid out. For instance, if your commission rate is 6%, it would be reasonable to reduce that commission to 4%, if the buyer is unrepresented. Personally, I would request a variable rate of 3% rate, although most agents won’t agree to go this low.
Not surprisingly, most agents will not voluntarily bring up the option of a variable rate listing agreement, so you need to make sure and ask for it specifically. Don’t be surprised if your agent doesn’t understand the concept at first – it’s likely that his company is not training him to offer lower listing commissions.
A request for a variable rate listing clause is totally reasonable and more than fair. If, after explaining the concept to your agent, he refuses to agree – just find a different agent who will. If you need a recommendation, you can try this link.